Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Tech Giants Need Dividends, Too

Will technology companies possibly follow Microsoft's lead by borrowing to pay shareholders?

In early August, IBM(NYSE: IBM) issued $1.5 billion in debt. The 3-year notes had a coupon rate of 1%, which, according to Bloomberg, is the lowest coupon of all the 3,400 companies listed on the Barclays Capital Corporate U.S. Index of corporate-grade debt.

Now, just a month later, tech titan Microsoft(Nasdaq: MSFT) is reportedly considering issuing some new debt of its own. For a company flush with more than $35 billion in cash, it's hard to say that it is in dire straits of a cash infusion. However, with yields so low and sporting a triple-A credit rating, it may just make sense for a slow(er) growing company like Microsoft to leverage up.

Hopefully, though, Microsoft isn't mulling over an ill-planned acquisition or some strategic shift in business strategy. For shareholders who have seen a 30% loss in the past decade, the hope is that Microsoft will look for ways to finally return some value to shareholders.

Give me the dividends alreadyAs the first of 70 million-plus baby boomers gets ready to retire next year, companies are going to be more and more cognizant of the fact that individual investors need income -- preferably in the form of dividends. Of course tech companies loathe the mere thought of dividends; such an idea implies the high-growing, innovative days of Silicon Valley childhood are over. But Microsoft already pays a dividend; yes, it's a paltry 2.07%, but still, it's something.

The blatant fact is that many technology stocks are overloaded with cash-rich balance sheets, and they face two options: reward shareholders through dividends or share buybacks, or pursue growth organically or by way of acquisition. We've already seen how out of hand M&A can get as Hewlett-Packard and Dell waged a premium-priced war over 3Par. And the sentiment I see from shareholders is this: Give me the dividends already!

I'm not one to advocate for financial engineering, but when it's really quite simple, such as "borrow at insanely low rates, invest elsewhere, and pay back money to shareholders" -- it's hard to lambast such a strategy. In that vein, let's check out which companies could possibly follow Microsoft in its path to issue debt and maybe, just maybe, some-day soon start paying a dividend:

Company

Current Dividend Yield

Cash/Debt (billions)

Google(Nasdaq: GOOG)

None

$30.1/$0

Apple(Nasdaq: AAPL)

None

$24.2/$0

eBay(Nasdaq: EBAY)

None

$4.9/$0

Qualcomm(Nasdaq: QCOM)

1.9%

$9.9/$1.2

Activision Blizzard(Nasdaq: ATVI)

1.3%

$2.9/$0

Source: Capital IQ, a division of Standard & Poor's.

The Foolish bottom lineBy no means is this the first article taking a stab at tech companies that refuse to shell out a healthy dividend. Analysts have been berating Apple for years. But now seems like a pretty interesting time, as investors are clamoring to dividend stocks for safety and income, and corporations seem to have more cash than ever.

What do you think -- should some of these tech all-stars start dishing out a dividend? Let it out in the comments below!

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.